How would Sydneysiders like it if instead of being $520,000, the average price of a new house were $180,000? The aspiring new home buyer in Melbourne would surely welcome an average price of $175,000 rather than the present $380,000? And would not a new house price of $150,000 rather than the average of $330,000 gladden the hearts of the struggling Adelaide would-be home owner?
The only thing preventing the realisation of the Australian dream of home ownership at these prices is land restrictions by governments.
The 2nd Annual Demographia Survey of International Housing Prices, which has just been released, shows that out of 100 cities worldwide, Australian cities have the dubious distinction of filling four of the top 20 positions for unaffordability.
The index, based on median house prices to the median level of household income, has the multiple of house prices to annual household income at 8.5 for Sydney, 6.5 for Adelaide and 6.4 for Melbourne. Some major North American cities, like Los Angeles and San Francisco, are even less affordable than their Australian counterparts. But in other large cities, like Houston, Dallas, Atlanta, Quebec and St Louis, houses of a comparable standard to those in Australia are sold at average prices that are less than threefold average household income levels.
Some state governments are doing their level best to boost the building costs of new housing by introducing measures like Victoria's five-star energy saving requirement. Even so, building a new house in Australia is generally cheaper than in North America. This is a result of Australia's web of independent house builders and subcontractors who manage to earn handsome livings for themselves in a highly competitive market that keeps prices down and quality up.
It is land that is dearer in Australia than in the more affordable United States urban areas. This is not a result of natural scarcity of developable land -- few North American areas offer more scope for easy expansion than is found in Australian cities. Nor is there a general shortage of land -- Australian urban areas take up only 0.3 per cent of the continent, one of the lowest levels of urban development seen anywhere in the world.
The culprit is regulation. Overseen by the planning fraternity, regulation in the form of zoning controls severely restricts the availability of land for building. These controls sharply curtail the permitted uses that landowners have over their properties. The value of their land is thereby subjected to a lottery -- those allowed to use land close to existing urban developments as they please benefit greatly. This is at the expense of those who are forced to retain it in lower-valued agricultural uses.
Supporting planning professionals in restraining land availability with so-called "smart" growth plans is the anti-growth lobby, which wants to restrict land usage that involves dwellings. In the main these people are existing home owners who oppose development, even though this would allow later generations to share their home-owning status. In the process, the regulation-instigated land shortage fuels the increase in prices for existing homes.
In a major sense, therefore, those wishing to gain a foothold in the housing market are, as a result of regulatory restraints on land availability, paying a tax to existing home owners who see their properties rising in price.
This is evident in the rising share of land within the housing package. In 30 years the land component in a new house has risen from 25 per cent to 38 per cent in Melbourne and from 32 per cent to a staggering 62 per cent in Sydney. These increases are from an already inflated base since zoning restraints have a long history in Australian urban areas.
By contrast to Australia's cities, even in cities like Houston and Atlanta that are growing very rapidly, prices have remained affordable. Their land-use policies have not been used to deny land owners the right to dispose of their property as they please and in the process the new home buyer has benefited from more affordable housing.
The painstakingly assembled Demographia survey demonstrates that Australia has a better option in its housing and land-use policies.
ADVERTISEMENT
No comments:
Post a Comment